C. The Doctrine of Promissory Estoppel

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 279-287

Contenidos

• 1) Sword vs. Shield?
• 2) Intended to Be Acted Upon.
• 3) The Nature of the Undertaking.
• 4) Reassertion of Rights upon Notice.

Page 279

A more expansive version of waiver doctrine, commonly referred to as equitable or promissory estoppel, was articulated by Denning J. in the leading case of High Trees.¹⁴ The defendant, High Trees, had taken a thirty-nine-year lease of a new block of flats in London in 1937. The flats had not been fully let before the outbreak of the war. In the wartime conditions, it appeared likely that the income from the flats would not be sufficient to pay the rent reserved under the lease. Accordingly, the plaintiff landlord agreed to a reduction in the rent. The defendant then paid rent at the lesser rate through the wartime period. This continued even when the flats had been fully let at the beginning of 1945. In late 1945, the recently appointed receiver of the plaintiff company, having discovered the nature of this arrangement, wrote a letter to the defendant demanding both payment of rent at the full rate in the future and a full accounting of the arrears. In order to test its legal position, the receiver then brought a claim for rent at the full rate for the last two quarters of 1945. Understandably, the plaintiff placed reliance on Foakes v. Beer and Jorden v. Money in arguing that its undertaking to accept a reduced rent did not preclude it from reasserting its entitlement to the full rent payable under the lease. Waiver would not apply to a promise to accept a partial payment as a full discharge of an obligation. The landlord’s undertaking was a promise, not a representation, and therefore could not be the subject of an estoppel.

These arguments did not enjoy success. It was Denning J.’s view that the doctrine of Hughes would come to the aid of the tenant at least with respect to the payments made prior to the early part of 1945. Denning J. reasoned that where one has given, albeit gratuitously, a prom-

Page 280

ise that was intended to be binding and intended to be acted upon and which was in fact acted upon, the promise should be considered to be binding. The Hughes case was relied upon by Denning J. as authority for the proposition that equity would not allow one to "go back on such a promise." "In my opinion," he said, "the time has now come for the validity of such a promise to be recognized."¹⁵Strictly speaking, of course, it was not necessary for Denning J. to decide whether the landlord could recover the earlier arrears. The actual claim was for the last two quarters of 1945 at a time when, according to its own terms, the landlord’s undertaking might be considered to have expired. Nonetheless, it was plainly Denning J.’s view that the effect of the landlord’s undertaking was to extinguish the obligation to pay full rent during the earlier period. On this basis, the doctrine of promissory estoppel, rather like waiver, would serve as an effective defence to a claim by the promisor attempting to enforce the original contractual arrangement.

1) Sword vs Shield?

In High Trees, Denning J. had referred to promises such as that given by the landlord as "binding" or as having "validity."¹⁶A few short years later, Denning L.J. had an opportunity to reconsider the meaning of these terms in Combe v. Combe.¹⁷The parties to this lawsuit were a divorced couple. The husband had promised to pay his former wife maintenance of £100 a year. It was found at trial that the wife had given no consideration for this promise. The plaintiff wife sought to enforce this promise, however, on the basis that it was rendered binding by the doctrine of promissory estoppel. Denning L.J. was thus obliged to consider whether the doctrine could be used merely defensively as it was in High Trees, or could be extended to provide an affirmative basis for enforcing a gratuitous promise. If it was to play the latter role, it would of course supplement or provide an alternative to the doctrine of consideration as a means of identifying enforceable promises. In Combe, however, Denning L.J. dismissed the claim and held that promissory estoppel could not found a cause of action to enforce the promise itself. "The doctrine of consideration is too firmly fixed," he said, "to be overthrown by a side-wind."¹⁸The role of promissory estoppel doctrine was restricted to preventing parties from insisting upon their strict legal rights in situa-

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tions where it would be unjust to allow actions to enforce them. As has often been said since, Denning L.J. clearly conceded in Combe that the doctrine of promissory estoppel can be used only as a shield and not as a sword. Although it is commonly accepted that Denning L.J.’s view on this point is correct, this is a point to which we must return.

Assuming, however, that it is true that the doctrine of promissory estoppel is restricted to this defensive role, it is likely that it will perform this role most commonly in the context of gratuitous contractual variations. It will serve, as in High Trees, as a defence to a claim brought by the promisor to enforce the original agreement in its own terms. As with waiver, though the defence may be more commonly deployed by defendants, it may also be used by plaintiffs who wish to rebut an allegation of contractual breach made by a defendant.¹⁹It is essential, however, that the contractual variation in each case constitute a concession rather than an affirmative undertaking to provide additional benefits under the agreement. In the latter case, an attempt to enforce the promise to provide more would flounder on the sword and shield distinction. This was the problem in Gilbert Steel,²⁰where a purchaser of steel had agreed to pay the supplier more than the original contract price. The supplier’s claim for the additional compensation failed on the ground that such a claim involved using the doctrine as a sword in attempting to enforce the gratuitous undertaking to pay more. On the other hand, if a purchaser gratuitously varied the agreement by agreeing to accept late delivery, such an undertaking would be effective in the sense that the supplier’s late delivery would be no answer to the supplier’s claim for the original contract price. The buyer would be estopped from treating late delivery as a breach. In short, concessions can create effective defences to claims. Affirmative promises to do more are ineffective because they require enforcement.

2) Intended to Be Acted Upon

One of the issues unresolved by High Trees relates to the degree of reliance or acting upon the promise by the promisee that must occur for the doctrine to apply. Must the type of reliance be, in some sense, detrimental or...